Holy Corruption

The police investigation into the approval process of a Jerusalem building project may reveal the worst case of corruption in Israel’s history.

By LAWRENCE RIFKIN
holyland 311 (photo credit: AP)
holyland 311
(photo credit: AP)
This article was published in The Jerusalem Report on March 1, 2010. To subscribe to The Jerusalem Report, click here.
In a recent skit on a wildly popular Israeli TV show, a comedian playing the spokesman for former prime minister Ehud Olmert, whose Hebrew initials are aleph aleph, ran down a list of others whose names start with the same letters. On the local side there were soccer legend Eli Ohana, chanteuse Etti Ankri and beloved pop singer Arik Einstein. Somewhat farther afield there was the late Israeli statesman Abba Eban, and much farther afield were Albert Einstein and shock-rocker Ozzy Osbourne.
Yes, quite a few people do share these initials. But this was no farce, for when the Israeli media reported that the letters had been penned on documents being held as evidence in the country’s latest scandale du jour, no knowing winks or nods were necessary: Olmert – already on trial for an amalgamation of other scandals involving alleged bribery (the “Investment Center affair”), influence peddling (the “Talansky affair”), and even double-billing for expenses (the “Rishon Tours affair”), and a veteran of so many police hot seats it’s a wonder his pants haven’t caught fire – fit the bill.
The current scandal, known simply as Holyland, takes its name from a gigantic real estate development in Jerusalem, where Olmert was mayor from 1993 to 2003. The development stands on a prominent ridge in the southwestern part of town that was once home to the modest Holyland Hotel, which was probably best known for its miniature replica of the city during the Second Temple era. While it was a major venue for tourists well into the 1990s, the site was half-hidden in a thick grove of pine trees above a busy thoroughfare, and many locals had no idea it was there.
But not anymore. The hotel, which had seen better times, was demolished, the Second Temple model was moved to the Israel Museum, and the stately pines were chopped down to make way for several medium-sized hotels aimed at alleviating the city’s chronic room shortage and also for a small number of private homes. Yet somehow during Olmert’s tenure, and for a time afterwards, the project morphed into a series of ungainly, in-your-face luxury residential towers on a now bare and painfully visible 35-acre outcropping, all of which has ensured that, in a town known for its relatively restrained architecture, everyone’s heard of Holyland.
“It’s a mistake in terms of its density, its height, its design,” David Kroyanker, an architect and author of some 30 books on Jerusalem architecture, tells The Jerusalem Report. “I don’t think there are many projects in the country that have elicited so many objections, both by professionals and the public. Standing below the hill, you have the feeling that the whole thing is about to slide down on you.”
One of the primary reasons for the change in plans regarding the project, say those in the know, was the second intifada, which sent tourism, at least figuratively, south. With low room occupancy and, at the time, no end in sight to the violence, the developers had second thoughts, although they appear to have kept some of the key planners in the dark.
“Our office was working on the hotel, which never got built,” Arthur Spector, an American-trained architect originally from Boston, tells The Report. “I didn’t like the feeling of the whole thing. Architecturally, it took us a long time to figure out that something funny was going on. We were working on smaller buildings, but bigger buildings were coming out.”
The plans that eventually emerged called for luxury residential towers. But there was a problem: The site had been zoned for hotels. What’s more, the original permits were for a project of relatively low density; density refers to the ratio of floor space to land and therefore, in order to be profitable, the residences would require a higher density. All this meant convincing City Hall to rezone the property. At some point, the rezoning was okayed, and the project’s building density was given the nod for a whopping four-fold increase.
Over 1,000 objections were ultimately lodged by interest groups such as environmentalists – who had come out against the project at its inception – and local residents, who feared that a housing project of such magnitude would introduce a litany of problems ranging from increased traffic, trash and pollution to blocked sunlight and ruined views.
According to Shlomo Hasson, a professor at the Hebrew University of Jerusalem, where he has chaired both the Geography Department and its Institute of Urban and Regional Studies, and the head of the Futura Institute, a planning think tank, these objections were not addressed at the local level, as they should have been.
“Lupolianski said the Holyland project was too complex and required a professional staff to hear the objections,” Hasson tells The Report, “so he simply forwarded them for the appeals process at the district level.”
Hasson is referring to Uri Lupolianski, an ultra-Orthodox deputy mayor who headed the all-powerful municipal planning and construction committee under Olmert. Lupolianski gained stature in Jerusalem and elsewhere as the longtime chairman of Yad Sarah, one of Israel’s best-known and best-run charities, which provides free medical equipment and services to the elderly and infirm. That, coupled with a jovial, unthreatening manner put to use in promoting religious-secular unity, and a winning, impish grin, helped make him the city’s first ultra-Orthodox mayor when Olmert returned to national politics in 2003.
Kroyanker, as both a resident of the city and a chronicler of its architectural progress, says it was clear that things were changing while Holyland was still on the drawing boards, but also after the first signs of construction began sprouting along the ridge.
“Every two or three years,” he says, “you found that the project was growing. And it wasn’t growing without people asking questions. Many of the original buyers objected in court to the project’s increasing density. I was sure that one day, someone was going to dig deeper into the story.”
Spector’s firm eventually left the project.
“We didn’t have a common language,” the architect says, referring to the developers. “Most of my firm’s work is understated – I wanted to cut down the mass, which was getting enormous.”
Smoothing the way for the metamorphosis into enormity, police say, was some $15 million in bribes, making it one of the nation’s worst instances of corruption, if not the worst.
The people allegedly behind the bribes were Hillel Charney, whose parents owned the original hotel, and Avigdor Kelner, a business partner. According to police, they used intermediaries described as machers, a Yiddish term meaning big shots with connections in the right places. One such alleged macher was Shmuel Dechner, a one-time stock market whiz whose investments later went sour. According to widespread press reports, Dechner became disgruntled when Charney refused to hand over a bigger piece of the action, and went to the police with documents and even tape recordings on matters concerning Holyland.
As of press time, investigators reportedly had a state’s witness, but were not saying who, although most of the speculation had centered on Dechner. They had also arrested Charney, Kelner and at least one other alleged macher, as well as Lupolianski, former city engineer Uri Sheetrit (who initially frowned upon the project before somehow coming around), several senior figures still at City Hall, and Uri Messer, a former law partner and confidant of Olmert. Investigators also had their eyes on Shula Zaken, Olmert’s faithful and longtime assistant, who may have forwarded some of the bribes. Like Messer, she’s been implicated in other corruption cases now preoccupying her boss.
Some of those arrested were still being held, while others had been released to house arrest, with all reports indicating that the investigation would go on for some time and most likely have a broad – and perhaps very high-reaching – sweep, as the changes entailed in the Holyland affair required the stamp of official bodies well beyond Jerusalem’s municipal planning and construction committee.
But the real question may not be solely about Holyland. Instead, the public and the media are asking whether some of the players in the affair resorted to similar shenanigans to promote other projects in the city and beyond, and, even more importantly, whether these practices have now become something of a norm.
Indeed, the investigation appears to have uncovered at least one other high-level bribery scandal, one allegedly involving Dan Dankner, a former chairman of Bank Hapoalim, Israel’s largest bank; Yaakov Efrati, a former head of the Israel Land Authority; and – yes – a bit of rezoning that, in return for bribes totaling as much as $400,000, made Dankner a tidy sum. The common denominator so far seems to be the machers involved, although there are reports that Efrati, too, may have played a role in Holyland, as well as in other instances of corruption that could involve Charney and Kelner. What’s more, Olmert, as minister of industry and trade at the time of the Dankner bribe, was Efrati’s boss.
“Holyland is not unique,” says Dr. Moshe Amirav, a college lecturer on public policy and a former Jerusalem municipal councilor who was active in city planning under the late Teddy Kollek, well before Holyland was ever publicly discussed. “If you have connections, especially in politics, you can accomplish things. You can also get away with things. There are a lot of gray areas – even when the law says something specific, there are many aspects that are open to interpretation.”
Amirav says this type of behavior is a throwback to the Diaspora, where Jews, the perennial outsiders, came to rely only on themselves and fellow Jews to get ahead.
“We are an immigrant society,” he tells The Report. “An immigrant society is typified by ‘landsmanship,’ which in this case means informal connections. They may have taken us out of the Diaspora, but they haven’t taken the Diaspora out of us.”
Concurring with Amirav, especially about the “gray areas,” is Dr. Meir Gilboa, a university lecturer on white-collar crime and a former top police investigator.
“The problem is that a large amount of what can be called ‘fraud’ takes place in gray zones, where it’s not quite criminal,” Gilboa explains to The Report. “It can be picked up by the media and even by the state comptroller. But because of the gray areas, there’s no prosecution – and the perpetrator says, ‘Hey, I got away with it.’ And there’s a good chance he’ll do it again.”
So, is Israel a corrupt country? “No,” says Gilboa, “but it has a not-small group of politicians and business people who are corrupt and corrupting, and we are a country where corners are cut, where deals are made. We’re also a country with a free and open press, which means these things come to light.”
Israelis may or may not agree. In April, after news of the Holyland scandal broke, a poll taken in Israel found that 64 percent of the respondents felt that the country was corrupt or very corrupt. That may sound high. But in a similar poll conducted last June, fully 72 percent of the respondents felt this way. And in April, the rate of respondents who felt that Israel was getting more corrupt with time stood at 69 percent, a figure almost identical with that from the June poll.
“To our surprise, we discovered that the public had not changed its opinion despite the fact that one of the worst cases of corruption had just been uncovered,” Dr. Doron Navot, a Haifa University expert on corruption, told the Israeli business daily “The Marker.”
Perhaps the only thing this proves is that Israelis have become blasé about corruption. So is there anything more scientific?
Last November, Transparency Interna- tional, a self-described “global coalition against corruption,” released the 2009 results from its annual Corruption Perceptions Index, in which it uses “independent surveys” to rate 180 countries for perceived corruption among public officials. It posts results on a scale of 1 to 10, with 1 being the most corrupt, and 10 being the least.
Using six surveys in 2009, it gave Israel a rating of 6.1 and ranked it 32, behind New Zealand (with a rating of 9.4 that put it in first place in terms of transparency), the US (7.5/19) and Qatar (7.0/22), and tied with Spain. It came ahead of Taiwan (5.6/37), South Korea (5.5/39) and Saudi Arabia (4.3/63), with Somalia getting a rating of just 1.1, which put it in last place.
In 2008, Israel was given a rating of 6.0 and ranking of 33, and in the 2006 index, it was rated 5.9 and ranked 34, so, clearly, there’s been an improvement – until you start going farther back, for example to 2005 (6.3/28), 2003 (7.0/21 – tied with Japan), 2002 (7.3/18 – tied with Germany) and 2001 (7.6/16 – tied with the US).
So perhaps Israel is getting more corrupt.
Prof. Ephraim Yaar, who teaches sociology and social psychology at Tel Aviv University, believes that Transparency International’s corruption index is important, although he points out that it’s still based on surveys, which reflect mere opinions.
“There are so many areas where corruption can penetrate,” he tells The Report. “Also, corruption tends to hide itself, so we’ll never get our hands on all the data – although there are already huge amounts of data; there’s simply been no objective yardstick.”
Yaar is out to change that. Together with associates, he’s spent the last two years compiling an Israel Corruption Index that relies on hard data (from court records and comptroller reports, for example) as well as information from other sources, such as media coverage.
It sounds simple, but it’s not.
“All of this time has been spent trying to determine what our indices should be,” he says. “The system doesn’t lend itself to showing how corrupt it is. Part of this is due to regulations guarding privacy. In addition, many court verdicts make it difficult to say whether the issue was corruption or something that was merely procedural. Another of our sources is the State Comptroller’s office, but even there they haven’t classified public complaints in a useful way.”
So the jury is still out on corruption in Israel. Yet policeinvestigators and state prosecutors seem determined to get to thebottom of the Holyland affair. While in the past the police have oftenrushed to bring charges against top officials – only to see the filesclosed, often under direct orders by the attorney-general, due to“insufficient evidence” or “lack of public interest” – this timethey’re moving carefully and in close coordination with prosecutors.
As this issue went to press, Ehud Olmert had yet to be questioned, letalone arrested, although he’d issued a statement denying any connectionwith the affair. But he’s also been busy defending himself against theother charges, so unless his lawyers get Albert Einstein or OzzyOsbourne to step forward with a dramatic confession, the initials onthose Holyland documents will continue to dog him, as well as thecountry’s climb back up Transparency’s index.  
This article was published in The Jerusalem Report on March 1, 2010. To subscribe to The Jerusalem Report, click here.